The National Assembly elections of Sept. 26, 2010, transformed Venezuela’s political landscape. In 2005 the opposition political parties had boycotted the elections to the National Assembly, and supporters of Pres. Hugo Chávez took total control of the legislature. This time a broad coalition of opposition parties, the Democratic Unity Table (MUD), divided the popular vote equally with the official government party, the United Socialist Party of Venezuela (PSUV). Changes in the electoral law enabled the PSUV to win 98 of 165 seats, while the MUD captured 65, and the small radical leftist political party, Fatherland for All, won the remaining 2 seats. Chávez had campaigned hard for the PSUV candidates and framed the election as a referendum on his government. Thus, even though the PSUV retained control of the National Assembly, party leaders were disappointed. The once-dominant Democratic Action (AD) party and the Zulia-based party A New Time elected more deputies than any of the other parties in the MUD coalition. Although no opposition leader emerged from the election with the stature to unilaterally challenge Chávez in the 2012 presidential elections, the close popular vote suggested that the president might find himself in a competitive race for reelection if the opposition coalesced behind an attractive candidate.

An angry woman bangs a pot in support of a student demonstration in Caracas on Jan. 28, 2010. …

Fernando Llano/AP

Meanwhile, the Venezuelan government implemented laws that cemented its hold on power. Most significant was the law that established socialist communes—communal development districts controlled by the Ministry of Popular Power for Communes. The authority of the communes (more than 180 of which had been established by February) extended across traditional municipal and state government boundaries. Moreover, the dividing line between the communes’ authority and that of local governments, state governments, and the already-existing communal councils was a contentious matter. On Dec. 29, 2009, a revised communal council law went into effect. It regularized procedures for the election and replacement council members, increased the power of the councils to allocate resources, and established mechanisms for budgetary control. The National Assembly also established the Federal Council of Government, with the responsibility to define relations between the communes, the communal councils, the municipalities, and the states.

In late November flooding and mudslides caused by torrential rain displaced thousands and killed more than 30. Ostensibly to allow for quick action in response to the flooding, the lame-duck legislature granted the president the power to enact laws by decree for 18 months. Opponents labeled the action a power grab and were equally critical of newly passed measures that cracked down on political dissent on the Internet and punished legislators for switching political parties

Venezuela’s economy remained dependent on petroleum revenue. Oil production in 2010 was roughly 2.2 million bbl per day, down from 3.5 million bbl in 1998. Overall the economy contracted by roughly 3%. Consequently, the IMF characterized Venezuela’s recovery from the global economic downturn as “delayed and weak.” The situation was exacerbated by the nationalization of Owens-Illinois glass factories, the projected takeover of food producer Empresas Polar, and skyrocketing crime rates. On the other hand, Chávez’s January currency devaluation doubled the value of government oil income in local currency. Venezuela was in no danger of a foreign-exchange crisis, however, as the official reserves at the central bank stood at $28 billion in November, with a sizable account surplus of $19.8 billion, or about 6.3% of GDP.

In the international arena, Chávez focused on increasing Venezuela’s influence in Latin America, on strengthening relations with petroleum-producing states in the Middle East, and on discrediting the U.S. Venezuela continued to provide Cuba with roughly 100,000 bbl of petroleum a day and funded the expansion of Cuba’s refinery at Cienfuegos. After Colombian Pres. Álvaro Uribe accused Venezuela of having supported the Revolutionary Armed Forces of Colombia (FARC), Chávez broke diplomatic relations with Colombia. On August 10, however, following the election of Juan Manuel Santos as president of Colombia, Chávez reestablished those relations. Finally, in 2010 Venezuela received a loan from Russia for the purchase of $2 billion in weapons and one of $20 billion from China to modernize its petroleum-extraction infrastructure.

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